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Charities bullish over investments

Charities investment confidence rose considerably in 2005, a new survey has found. The JPMorgan Asset Management Charity Investment Industry Survey 2005 says the bullishness is represented in charities' appetite for risk, expected returns, and asset allocation. Whereas in 2004 charities were cautious due to disappointing stock market performance in the earlier part of the decade, 2005 saw a significant turnaround stemming from the good performance of equities and most other asset classes over the past year.

Almost a third expect overall investment returns of 8 per cent or more over the next three to five years, compared with only 8 per cent of in 2004 (see chart). In addition, 90 per cent expect returns to meet the future requirements and commitments of the charity, compared to 81 per cent last year. Half of 2005 respondents expect healthy returns (8 per cent or more) from UK equities. Three quarters of charities saw their assets grow in 2005, with more than half experiencing growth of over 11 per cent. Less than a third of charities saw these kinds of returns in 2004.

More than two thirds of charities have carried out formal manager reviews within the past two years as part of their regular review timetable. However, almost half made no manager alterations at the time, which the survey says again highlights charities'optimism about the future, and indicates they are feeling more at ease with their investment decisions.

Jeremy Wells, head of charities investment at JPMorgan, said the survey showed an astonishing u-turn in the mindset of charities over the past year. "While 2004 saw caution and risk aversion, 2005 reveals an enhanced confidence within charity investment, arising from strong performance over the past year. Indeed, the optimism is such that 13 per cent of charities reveal they have no concerns whatsoever about managing their assets over the next three to five years."

Annual percentage rate of return expected over next 3-5 years (% respondents)

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